To St. Petersburg electronics manufacturer Jabil Circuit Inc., it's been the equivalent of the Spanish Inquisition. For two years and eight months, Jabil has been under suspicion of backdating stock options for its executives to maximize their personal financial gains. Now it's finally over, it appears.
"There was no backdating," Jabil CEO Tim Main told the St. Petersburg Times back in 2006. Main has maintained his company has been the victim of a "witch hunt" by the Wall Street Journal, which on March 20, 2006, named Jabil and five other companies, raising suspicions about the timing of stock option grants. Reacting to that Journal story, the Securities and Exchange Commission and the U.S. Attorney's Office launched inquiries into the stock options practices at Jabil Circuit.
In a conversation at Jabil headquarters during the SEC investigation, Main told me that the SEC threat and the vague allegations had hurt the morale at the company — a 75,000-employee business with worldwide operations and, frankly, plenty of accompanying pride. Jabil executives spent a ton of money trying to defend or at least explain its stock options plan to the SEC and lamented the distraction away from its competitive industry.
Jabil has acknowledged some administrative errors. And it also settled a resulting class-action lawsuit filed in the U.S. District Court in Tampa that represented investors who purchased Jabil securities between Sept. 19, 2001, and June 21, 2006. A federal court judge dismissed the suit in April 2008 after Jabil agreed to change its compensation policies and pay out $700,000 to cover attorney's fees for the plaintiffs.
On Tuesday, Jabil announced the unusual: The SEC had specifically told the company the inquiry was over. That does not happen often. Here's what the company said:
"Jabil announced that it had received a letter from the SEC Division of Enforcement advising that the Division had completed its investigation and did not intend to recommend that the SEC take any enforcement action."
If the champagne is not flowing at Jabil's headquarters, then at least there must be some grim satisfaction that the regulatory nightmare appears to be over. Coincidentally, Jabil stock traded over $40 a share in early 2006, just before the Journal's claims of backdating shenanigans. Jabil shares now trade under $6.
Not all companies accused of backdating stock options have fared so well. Earlier this year, a plea agreement was filed in federal court indicating Henry Samueli, a founder of Broadcom, would plead guilty to lying to the SEC during an inquiry into the backdating of stock options at the computer chip maker. At another of those companies, three former executives of software company Comverse Technology Inc. were charged for their roles in orchestrating a long-running scheme to manipulate the granting of millions of Comverse stock options to themselves and to employees.
Robert Trigaux can be reached at email@example.com.